The Daley Note: November 22, 2023
Enbridge (ENB) plans to hold an open season in 4Q23 to expand Gray Oak Pipeline and offer full-path service for crude oil exports through the Enbridge Ingleside Energy Center (EIEC).
ENB announced the open season in its 3Q23 earnings report. If the tariff for the additional capacity is in line with current tariffs from the Permian Basin to Corpus Christi, the Gray Oak expansion will pave the way for additional crude oil exports.
Pipelines from the Permian to Corpus Christi are running at an average utilization rate of 91% in November, according to East Daley Analytics’ Crude Hub Model. Permian-to-Corpus routes are above the 90% cap on committed volumes mandated by the Federal Energy Regulatory Commission (FERC), which trigger unattractive walk-up rates for shippers.
As a result of the higher walk-up rates, we’ve seen additional barrels diverted to the Houston market and to Cushing, even though docks in Corpus Christi still have ample export capacity. In the Crude Hub Model, we project Corpus Christi export terminals to average 52% utilization in November, while ENB’s EIEC terminal sees 53% utilization.
Enbridge previously said that a 200 Mb/d expansion on Gray Oak is possible. East Daley believes the expansion will be completed through drag-reducing agents.
To fill the Gray Oak expansion, EDA forecasts crude oil volumes would primarily shift from Houston as well as displace some barrels flowing to Cushing. Enterprise Products (EPD) recently announced plans to convert the Midland-to-Echo 2 pipeline to NGL service in December 2023, which will take some capacity offline to the Houston refiner and export market.
The additional crude flows Gray Oak would relieve pressure on pipelines transporting to the Houston market. If the Gray Oak project is successful, Permian-to-Houston pipeline utilization would decline from 94% to 90% by December 2024, according to the Crude Hub Model. – Kristine Oleszek Tickers: ENB, EPD.
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